of, whether they are first-time buyers or otherwise. The IRS allows you to deduct, from your taxable income, the interest you pay your lender. Home mortgage interest is one of the largest deductions for those who itemize. Lenders will report your mortgage interest on a 1098 form, sent out annually. The Mortgage Interest Deduction (MID) is valid for mortgage debt up to $750,000 or mortgage debt up to $375,000 if you are married but filing separately. Homebuyers can receive a large benefit in the first years after buying, as the first repayments have the highest interest. To claim the MID benefit, homebuyers will have to file an itemized tax return. Check with your professional tax preparer for up-to-date information. • Mortgage Points. Discount points (also known as mortgage points) are fees paid directly to the lender at closing in exchange for a reduced interest rate. The cost of discount points is equivalent to 1% of your mortgage ($1,000 for every $100,000). Discount points involve prepaid interest and can reduce your total mortgage payment. The interest rate on your mortgage typically lowers by 0.25% with each point you buy. If you elect to do this, the fee for the points is tax deductible for the year in which you paid them, assuming the loan you obtained is for your full-time, year-round home (as opposed to a second home or a vacation home). • Mortgage Credit Certification. The Mortgage Credit Certification (MCC) is another program that helps thousands of homebuyers secure a tax credit, increasing payment affordability. This IRS-based program is aimed at helping lower-income groups afford their first home.
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